



Homeowners more than £350k better off than private renters over 30 years

The average homeowner in this country could be £352,500 better off than the average private renter over the next 30 years, even if residential property prices do not increase, new research reveals. 

The latest report from the Intermediary Mortgage Lenders Association (IMLA) says that while private renters might expect to pay out £451,600 over the next 30 years, taking into account a projected increase of 2% in rent per year, a homeowner on a 25-year repayment mortgage could pay £317,900 if interest rates remain at current levels.

Over a 30-year period, the average homeowner could expect to save £133,700 when paying a mortgage rather than rent, while also gaining £218,000 of equity from paying the mortgage off.

The report, The Intergenerational Divide in the housing and mortgage markets, finds mortgage rates would have to be in excess of 11.5% throughout the life of a loan before owning and renting produced equal expected financial returns. 

Kate Davies, executive director of the IMLA, said: “Becoming a homeowner is a life-changing experience. It can also transform your long-term finances – and this research quantifies the extent of that transformation. 

“The long-term benefits of being a homeowner are not just confined to the property value and the potential for house prices to increase – homeowners also potentially save hundreds of thousands of pounds compared to their private renter counterparts.”

Despite the financial benefits of buying a property, there has been a marked decline in homeownership amongst younger people, and yet the research suggests that rising house prices are not the main barrier to first-time buyers. 

Rather, it suggests that the sharp tightening of mortgage lending criteria in the wake of the financial crisis prevented many consumers from getting on the ladder while the subsequent increase in regulation has limited options for potential buyers to become homeowners.   

IMLA is calling on the government to commission an independent cost-benefit analysis of the current regulatory regime for mortgages to assess whether current regulations could be contributing to potential consumer detriment by excluding some consumers from homeownership.

Davies added: “Whilst this report highlights a stark difference in the long-term financial position of those who buy as against those who rent, it also underlines the importance of a continuing and healthy private sector for those who are renting – whether they need to rent long-term or are saving up to buy their own homes.  

“The PRS continues to play a vital role in Britain’s housing market as well and IMLA will continue to champion the need for a vibrant and competitive sector which provides homes for millions of people who need or want to rent.  But we do think it is important that the FCA and the Bank of England should acknowledge and take account of the financial situation for those who cannot buy or enter social housing when implementing rules in the mortgage market.”

  • G romit

    Typical biased report promulgated by this site.
    As usual it ignores things like maintenance costs, building insurance, etc which is included in the rent.


    It may ignore maintenance costs, building insurance etc but the truth is that rent is basically dead money, whereas mortgage payments are akin to savings. A home-owner can sell up if they should want their money from the house, and if they manage to pay off the mortgage they essentially have free housing and dramatically improved disposable income. You can't say the same of someone who's spent a life renting.
    I'm not trying to say that renting is the worse option but if you look at it on the basis I've set out I think it's obvious which one most people would prefer.

  • Paul Barrett

    In an ideal world everyone should be able to own at least one Residential property but with the flexibility to be able to let it out and rent elsewhere if domestic circumstances force the situation.

    But lenders force residential mortgage holders to change mortgage product if the letting of the home is to be for an extended period surpassing the usual CTL period.
    This forces homeowners to game the system to prevent being forced into another mortgage type having detrimental conditions compared to their current resi mortgage.
    The reduction in flexibility is another major reason why people refuse to buy.
    It is good for society if everyone had a stake in their own resi property whether they were able to live in it or not.
    Lenders need to change their attitudes but they WON'T!

  • icon

    The message is clear. Generation rent should buy a vacuum flask for cheap coffees, avoid fancy holidays and pcp cars and they too can become better off, but they had also better buy a tool kit and learn some basic diy and other money saving skills - then they can join the grown ups!


    Will never happen Robert, they are the lazy I'm entitled generation.

  • icon

    I see various articles today about how well landlords would do over 30 year period / £352k. I don't agree with this, the projection is Rent increase 2% pa, I haven't being able to achieve this over the last 20 years not alone 30. I have my own evidence house that rented for £1720 pm in 1999 now I get £2200 pm but @ 2% I would be getting £2'555 so I am short £355 x 12 = £4260 pa.
    Another one £1820 in 1999 now £2300 but @ 2% it would be £2700 so again I am short £404 x 12 = £4848 pa. They are projection into the future much better than the past not possible in this down turn plus dozens of costs loaded onto us with regulations that wasn't there before and also a whole raft of tax increases. The last 20 years in reality I have had no increase it's all been gobbled up + loss of wear & tear, How to rent / Right to Rent etc.
    I am trying to understand this article comparing Landlord to Tenant, it didn't say if one person was renting the property or would that be say 5 sharers who move dozens of times in various mixes & hope to get this fictitious amount between them or would it be one of them. London rental market is not good I think the Regulators have Farmer Economics Syndrome they count what they got for the Animals as profit without counting the costs. We also know property is hard to sell because of unfair competition the help to buy disaster distorting the market. I had a hard day fixing things that should be broken.

    Paul Barrett

    Your assessment of things as you have mentioned are very realistic.
    Sort of proves that without a decent chance of CG there isn't much point gambling on yield.
    Such yields as are being achieved were already struggling before all the latest bonkers anti-PRS policies had been introduced starting with S24.

    When you factor in all these cost burdens compared to what they were before 2015 the yields are inadequate to keep a property viable.
    This situation has been in a low interest environment.
    If IR increased there is no way any of my properties would be viable.
    Mind you that situation probably is the case with many homeowners.
    Everything is on a knife edge.
    I don't believe that tenants have any comprehension as to how close they are to their LL selling up so finely balanced is the business proposition because of all the ridiculous penal policies being imposed on LL.
    The threat of a Labour Party with expropriation and rent controls is just too much to bear
    It makes rental property as an investment class completely pointless.
    Only a fool would remain invested in assets with the risk of the asset value being stolen every 5 years and for any income achievable to be restricted.
    It simply makes no business sense whatsoever.
    Of course the bonkers policies of a Marxist Labour Govt may never come to pass.
    But that is a big gamble over a 30 to 40 year investment timeline.
    To be in a potential situation where all one's efforts could be stolen every 5 years makes it pointless bothering in the first place.
    The eviction laws are a major impediment for LL who AREN'T able to resource RGI.
    Without RGI a LL is pretty much at the mercy of the tenant.
    That makes taking on a tenant without RGI a very risky gamble.
    All these factors have led me to determine to leave the PRS.
    I like the idea of lodgers or FHL though those two possibilities require a lot more capital and to be more hands on so hardly a passive investment.
    But it does seem from your figures that BTL is a barely viable investment class.
    It probably isn't anymore due to all the recent bonkers policies.
    I'm not too sure that many new entrant LL have a clue about any of these issues.
    They still think it is like 1997.
    How wrong they are!


    Hi Michael
    I actually have a property that I am getting less rent for now than I was 20 years ago, so says it all really.
    You are lucky that you have been able to raise your rents at all.
    Despite house prices going up by around 30% in some areas I have property in these parts where rents haven't gone up at all.
    I have a reasonable income with some commercial properties, but if I had to rely totally on the residential ones I would be in trouble.
    I have had to replace three boilers this year, which equates to a loss of two months rent.
    Coupled with service charges etc, I am down four months rent on two properties already.
    Not so wonderful a return as some would suggest, with more regulation and extra costs no doubt to come.


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